Year-End Thin Trading Leaves Major Indexes Struggling for Direction

Major U.S. stock indexes are treading water as year-end trading winds down ahead of the December 9 holiday period. The S&P 500 Index slipped -0.10%, the Dow Jones Industrials declined -0.15%, and the Nasdaq 100 dipped -0.17%. Corresponding futures contracts mirrored the weakness, with March E-mini S&P futures down -0.11% and March E-mini Nasdaq futures falling -0.17%.

The tepid performance reflects the seasonal thinning of market liquidity as traders head into the final stretch of December. Many international equity markets, including Germany, Japan, and South Korea, are already wrapping up their trading calendars. This reduced participation typically leads to directionless price action and amplified volatility in thin volume.

Economic Data Offers Some Support Amid Holiday Lull

Despite the cautious tone, U.S. economic releases came in stronger than anticipated, providing modest support to equities. The October S&P Case-Shiller composite-20 home price index climbed +0.3% month-over-month and +1.3% year-over-year, beating expectations of +0.1% m/m and +1.1% y/y. Additionally, the December MNI Chicago PMI surged +9.2 points to 43.5, meaningfully exceeding the forecasted 40.0 reading.

Historically, the December 9 holiday season has proven bullish for stock performance. Research from Citadel Securities reveals that since 1928, the S&P 500 has advanced approximately 75% of the time during the final two weeks of December, posting an average gain of 1.3%. This seasonal tailwind could provide a cushion if market sentiment remains constructive.

Market focus this shortened week will center on the upcoming FOMC minutes release later today and initial weekly unemployment claims expected Wednesday. Friday will bring the December S&P manufacturing PMI, with consensus expecting a holding pattern at 51.8.

Rising Bond Yields Create Headwind for Equities

The 10-year Treasury yield climbed +2.2 basis points to 4.132%, pressuring equity valuations. March 10-year T-note futures fell -4 ticks as year-end liquidation by bond portfolio managers weighed on the fixed-income complex. Comments from President Trump regarding Federal Reserve independence—specifically his remarks about potentially replacing Fed Chair Powell—have added uncertainty to the rates complex.

European government bond yields are rising across the board. Germany’s 10-year bund yield moved up +2.5 bp to 2.854%, while the UK’s 10-year gilt yield gained +0.4 bp to 4.491%. Spain’s December CPI increased +3.0% year-over-year as expected, though core CPI came in at +2.6% y/y, slightly above the +2.5% forecast.

Energy Stocks Lead as Crude Oil Extends Rally

Equities in the energy sector are outperforming as WTI crude oil extends Monday’s 2% advance. Devon Energy, Diamondback Energy, Halliburton, APA Corp, ConocoPhillips, SLB Ltd, and Occidental Petroleum all posted gains exceeding +1%.

In other notable moves, Molina Healthcare climbed more than +3% to pace S&P 500 gainers following recognition of the company’s impressive expense ratios and underwriting track record. Boeing advanced more than +1% to lead Dow components after securing a U.S. Air Force contract valued up to $8.58 billion.

Citigroup, however, retreated more than -1% after announcing an anticipated $1.1 billion after-tax loss on the sale of its remaining Russian operations to Renaissance Capital.

Overseas, Europe’s Euro Stoxx 50 reached a 1.5-month high, climbing +0.76%, while China’s Shanghai Composite closed flat and Japan’s Nikkei 225 declined -0.37% to a one-week low. The mixed international performance underscores the cautious sentiment pervading global markets as December approaches its conclusion.